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Overview

BOC Aviation enters into second tranche of sale-and-leaseback agreement with Southwest Airlines for three of six Boeing 737-700 aircraft (Linked to Record ID#105780)

Commitments (Constant USD, 2023)$145,668,366
Commitment Year•2009Country of Activity•United StatesDirect Recipient Country of Incorporation•United StatesOverseas Jurisdiction•SingaporeSector•Transport And StorageFlow Type•Loan

Status

Project lifecycle

Completion

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Jun 1, 2009
End (actual)
Jun 1, 2009
Last repayment (originally scheduled)
May 28, 2025

Geospatial footprint

Map overview

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This sale-and-leaseback agreement supported the acquisition of three of six Boeing 737-700 aircraft by Southwest Airlines, which is headquartered at 2702 Love Field Drive, Dallas, TX 75235. More detailed location can be found at https://www.openstreetmap.org/way/443160778.

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

State-owned companies

  • BOC Aviation Limited

Receiving agencies

Private Sector

  • Southwest Airlines Co.

Loan desecription

BOC Aviation enters into second tranche of sale-and-leaseback agreement with Southwest Airlines for three of six Boeing 737-700 aircraft

Interest type•UnknownMaturity•16 years

Narrative

Full Description

Project narrative

On April 2 2009, BOC Aviation closed the first tranche of a sale-and-leaseback, or purchase and leaseback (PLB), agreement with Southwest Airlines for six Boeing 737-700 aircraft. The first tranche comprised three aircraft for 12 year leases. The first tranche is worth an estimated $105 million USD to be paid back in monthly $4.6 million USD installments at the six-month LIBOR rate as of March 30, 2009 (Record ID#105780). Lease payments were reset each six months. The second tranche was expected to have similar terms and to be delivered to Seattle in June 2009, and included the sale and leaseback remaining three aircraft for 16 years, as it was completed (Record ID#105906). Southwest had signed a deal with BOC Aviation for 10 aircraft four months prior, in December 2008 (Record ID#105781 and #105907).

Staff comments

1. A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. Under a capital lease (a financial arrangement where the lessee/borrower uses an asset and pays regular installments plus interest to the lender/lessor), rental payments are usually classified as interest and obligation payments, similarly to a mortgage (with the interest calculated each rental period on the outstanding obligation balance). AidData codes capital leases as loans. 2. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products. 3. AidData has estimated the value of this contribution as $105 million USD because the first tranche of three Boeing 737-700 aircraft was reported at this cost. This issue warrants further investigation.